How to Calculate the Impact of Investment Loss

Ten years have now passed since the stock market bottomed in 2009 and since then U.S. equities have annualized at between 17.38% for large companies and 17.68% for mid-sized companies.* These outsized gains, along with the fading memory of 2009, have made it increasingly difficult to maintain a diversified portfolio.

We’ve heard from advisors that the diversified portfolios they’ve established for their clients’ long-term goals are constantly being challenged—especially as the bull market continues—creating risk. In fact, many investors, especially those nearing retirement, fail to realize that in a downturn, it’s not only about the sudden loss of monetary resources, but also the amount of time needed to regain the portfolio’s value that becomes a concern. In short, it could mean delaying retirement and working a few more years to restore a retirement nest egg.

To help investors understand what an unexpected market drop could mean to their portfolio value—and how much time may be needed to get back to even—we’ve created an Investment Loss Calculator.

The calculator allows you to insert the starting portfolio value, percentage decline in the market, and then an average annual return assumption going forward. The calculator will then display the amount of money lost, and an estimate of the years needed to get the portfolio back to even.

 

For instance, if the market drops 20%, investors will need the market to return 11% annually for approximately two years for their assets to return to their pre-drop level.

Investors, and especially those nearing retirement, should be assessing the risks in their portfolios now, before the next downturn begins, and explore strategies that provide true portfolio diversification and hedge equity market risk.

Try out our Investment Loss Calculator Tool >